KeyBanc has voiced concerns regarding the clarity of Datadog's (DDOG) projected financial performance for 2026, leading to a revised price target for the company's stock. Despite affirming an 'Overweight' rating, the investment firm emphasizes the necessity for greater transparency in Datadog's forward-looking statements. This situation underscores a broader debate within the investment community about the company's growth trajectory, particularly concerning its core business acceleration and the consistency of revenue generated from its partnership with OpenAI.
On February 4th, KeyBanc's Eric Heath adjusted Datadog's price target downward from $170 to $155. This revision reflects the analytical firm's perspective that while Datadog holds a favorable position in the market, the lack of explicit guidance for 2026 poses a significant question mark. To instill investor confidence, Datadog's performance would ideally mirror the robust acceleration observed in its primary operations during Q3, coupled with a stable revenue stream from its collaboration with OpenAI.
Even if Datadog manages to surpass expectations modestly, similar to past quarters, KeyBanc anticipates that the initial guidance provided by management will likely be more conservative than current market estimates. Should the company adhere to its established approach for full-year revenue forecasting, it might project a slight decrease in net new revenue for its core business compared to the previous year. Under such a scenario, the implied revenue growth could settle in the high-teens percentage range.
A critical element of this financial outlook is OpenAI, which KeyBanc identifies as a substantial variable, potentially contributing up to $300 million in revenue and an estimated 90% of Datadog's AI-centric customer base. If Datadog's financial projections assume a flat growth trajectory for OpenAI, the total revenue guidance could fall within the mid-to-high teens. This contrasts with KeyBanc's own 20% estimate and the consensus market expectation of 21% growth, signaling a potential disconnect in growth expectations.
Overall, investor sentiment regarding Datadog remains divided, reflecting both optimism about its innovation and concerns about future guidance. While the company is lauded for its innovation, leadership, and the anticipated tailwinds from AI, it also faces challenges such as pricing pressures and increased competition. The uncertainty surrounding 2026 guidance, particularly the potential for fluctuations in OpenAI's contributions, adds a layer of risk that investors are closely monitoring. In the current software landscape, any sign of ambiguity can lead to immediate market reactions, making clear and consistent communication from Datadog's management crucial.